December 24, 2004
 
COMMENTARY: Thumbs Up, Thumbs Down, Part V: Dysfunctional Boomers; Martha’s Correct about Drug Sentencing; What took Paul Samuelson So Long?

by David M. Kinchen
Editor, Bluefield News Network

Hinton (BNN) -- At my last newspaper, the editorial page staff periodically published a useful commentary column involving thumbs: Up for good, Down for bad. I’m using this format, which is offered in many variations at various magazines and newspapers, to comment on some recent news items or events. This is the fifth installment of an occasional series.

THUMBS DOWN to those members of a dysfunctional baby-boom generation who think that money will solve all problems. The problem is what I call TMM Syndrome: Too Much Money. American corporate chief executives – most of them members of a generation born between 1946 and 1964 – are the most overpaid in the world, compared with the wages of the people who actually do the work. I’m thinking of two boomers in particular: 55-year-old Franklin D. Raines, who was just forced out of his extremely high-paying job at Fannie Mae, formally called the Federal National Mortgage Association, in yet another monster case of very creative accounting; the other one is a native of Summers County, West Virginia, Jack Whittaker, 57, who will be burying his 17-year-old granddaughter Brandi Bragg here in Hinton on Christmas Eve. Two years ago Saturday Whittaker garnered a record Powerball lottery payoff of more than $100 million – he chose to take a lump sum for the winning $314.9 million ticket – and he’s been in the news – mostly on the police blotter – ever since. Brandi Bragg, whose parents are never mentioned in news accounts, lived the life of a West Virginia Paris Hilton, with cars, homes, jewelry, etc. She died under very mysterious circumstances in the home of her 18-year-old boyfriend Brandon Crosier, who lives on aptly named Scary Creek Road in Scott Depot, Putnam County. The discovery of her body came only a few months after one of her other teen-age friends was found dead in Whittaker’s Scott Depot house, while the black-hat-wearing construction company owner was out of town.
 
Raines, a suave, expensively tailored executive who is a friend of baby-boomer Bill Clinton, had a childhood of welfare poverty. He was named CEO of the 66-year-old secondary mortgage lending giant in 1999, becoming the first African-American to head a Fortune 500 company. Along with the departure of Raines, another boomer, Timothy Howard, the chief financial officer, is also history. Here’s what the Fannie Mae web site says: “Fannie Mae's (FNM/NYSE) Board of Directors announced today [Dec. 23, 2004] the retirement of Chairman and Chief Executive Officer Franklin D. Raines and the resignation of Vice Chairman and Chief Financial Officer J. Timothy Howard.

“Effective immediately, board member Stephen B. Ashley will become the non-executive chairman of the board, Vice Chairman and Chief Operating Officer Daniel H. Mudd will serve as interim chief executive officer, and Executive Vice President Robert Levin will serve as interim chief financial officer. The executive search firm Spencer Stuart has been retained to work with the board. The board further announced that the audit committee has dismissed the firm KPMG LLP as the company's independent auditors, and has initiated a search for a new independent auditor.”

By the way, Dan Mudd is the son of broadcast journalist Roger Mudd. Fannie Mae, which buys mortgages, freeing up capital so banks and mortgage brokers can write more loans, swam into my ken in 1970, when Oakley Hunter ran the place on Wisconsin Avenue in Georgetown. I covered real estate at the Milwaukee Sentinel and had a crash course in housing finance. Fannie and I were both born in 1938, so I had a special feeling for the mortgage giant. It was privatized in the late 1960s, but enjoyed implicit guarantees that it was backed by the full faith and credit of the federal government. If any news organization deserves credit for the Fannie Mae shakeup, it’s the Wall Street Journal. The Journal has been calling for reform at Fannie for years now. Both Fannie and its junior counterpart, Freddie Mac, need complete reorganization. The mortgage industry, thanks to innovative private firms like California-based Countrywide Financial Corp., a company I learned about when I covered real estate for the Los Angeles Times from 1976-1990, no longer needs quasi-governmental organizations masquerading as private corporations, as Fannie does. I tried to find out from Fannie’s press office how much the two ousted executives made in salary, but received no response. According to a Dow Jones newswire report, Raines had a base salary of $1 million a year, not including bonuses. Susan Lee of the Wall Street Journal says Raines made $20 million a year, including bonuses, for heading what she calls “an over-leveraged hedge fund with substandard accounting....” Both Raines and Howard will probably be getting golden parachutes that will make it unnecessary for them to ever work another day for the rest of their lives.

THUMBS UP to Martha Stewart, now residing in Alderson Federal Prison Camp, for stating that our nation’s drug sentencing guidelines are totally out of control. She’s quoted in an Associated Press story as saying on her web site that Americans should push for reforms in federal sentencing guidelines for nonviolent drug offenders. Many of her sister inmates at the women-only prison are in for drug offenses. I agree with her; rehabilitation rather than incarceration should be the way to handle drug addicts. We don’t throw cancer patients or alcoholics in jail, so why should people who suffer from drug addiction be treated this way? As a libertarian (small “L”) I’m against the so-called war on drugs anyway. We should just declare it over and bug out, the way we did in Vietnam. By the way, the story notes that mega-millionaire Martha thinks the food sucks at Alderson. Welcome to the real world, not the world of Westport, Conn. and the Hamptons, Martha! I’m surprised she’s not getting catered meals from The Greenbrier, which is only a few miles down the road from Alderson.

THUMBS UP to Paul A. Samuelson, 89, the guy who wrote the economics book you probably bought for the Economics 101 course you took in college. I know I did, the 1958 edition. In an article in the Journal of Economic Perspectives this past summer, entitled “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization,” the dean of American economists questions the bedrock argument of economists that free trade is good for everyone concerned. As commentator Robert Kuttner says: “it is a bit like the pope having doubts about the virgin birth.” Ricardo is not the Ricky Ricardo of “I Love Lucy” fame: He’s the British economist David Ricardo who advanced the theory of free trade in 1817. Another respected economic commentator, William Greider, writing in the Dec. 20, 2004 issue of The Nation, says that when a poor, but ambitious nation – China – is trading with a very wealthy advanced economy – the U.S. – “free trade can turn into a very ugly loser for the wealthy country – inflicting permanent economic loss, stagnant wages, greater inequality and other hurtful consequences.” Neither I nor Lou Dobbs, who has been arguing this point for many months now on his cable TV show, could have said it better. Even a Nobel laureate multimillionaire economist who was born in Gary, Ind. in 1915 can be taught new tricks.

THUMBS UP to everyone from BNN: Merry Christmas and a happy and prosperous New Year!
 
Thumbs Archives:
10/16/04 — Part I
11/10/04 — Part II
11/26/04 — Part III
12/15/04 — Part IV
12/24/04 — Part V
12/31/04 — Part VI
01/08/05 — Part VII
01/14/05 — Part VIII
01/21/05 — Part IX
02/04/05 — Part X
02/11/05 — Part XI
02/18/05 — Part XII
02/25/05 — Part XIII
02/28/05 — Part XIV
03/06/05 — Part XV
03/10/05 — Part XVI
03/18/05 — Part XVII
03/26/05 — Part XVIII
03/30/05 — Part XIX
04/09/05 — Part XX